A state legislator considers a proposal that would require health
plans to cover screening for prostate cancer. While she recognizes
that prostate cancer is an important problem and that mandating
coverage can help increase access to these services, she is also
aware of the controversy among medical experts about the value of
general prostate cancer screening tests and is concerned about what
effect this mandate will have on the escalating cost of health
insurance and the number of uninsured individuals in her state.

The above scenario represents a dilemma facing many state legislators in considering the enactment of new state health insurance benefit mandates. While wanting to make sure that their constituents have access to the health care services they need, in a budget constrained environment the questions they face become: Of what real value are these benefits to the people of the state? Have these benefits been proven to be effective in improving health? And how much will a legislative mandate affect the general affordability of health insurance in the state?

State legislatures have addressed some of these questions by passing mandated benefit review (MBR) laws that inform the decision-making process by requiring a review of existing or proposed health insurance benefit mandates. This paper examines the rise of state MBR laws and the different approaches states have taken to conduct such reviews.

BACKGROUND

State health insurance mandates require that health insurers and/or health insurance products include coverage for a defined group of people (e.g., coverage for dependents, coverage for persons with a specific medical condition); types of providers (e.g., podiatrists, ophthalmologists, chiropractors); or certain treatments, services, pharmaceuticals, or durable medical equipment (e.g., mammograms, diabetes testing strips, orthotics). Additionally, state health insurance benefit mandates can dictate how care will be provided (e.g., minimum lengths of stay in a hospital following childbirth or surgery).

Jensen and Morrisey (1999) describe the history of state benefit mandate law adoption starting with the 1956 Massachusetts law that required dependent coverage for handicapped children. By the late 1990s, there were reportedly over 1,000 state health insurance benefit mandates in effect in the U.S. with a growing number of proposals being introduced and passed in state legislatures each year (Jensen and Morrisey 1999). While the National Conference of State Legislatures has suggested that the rate of state mandate adoption may have slowed in recent years (NCSL 2003), other organizations such as the Council for Affordable Health Insurance, which has identified over 1,800 existing state benefit mandates, argue that mandates remain prominent on state legislative agendas (Bunce and Wieske 2004).

The dramatic expansion of state-mandated health insurance benefits in the 1980s and 1990s was likely due to political factors. To begin, those who realized the benefits of health insurance mandates tended to be concentrated interests represented by well-organized groups of health care professionals and persons or parents of persons with a specific medical condition, who have an intense interest in a particular mandate and its outcome. At the same time, the costs of such benefit mandates were usually diffuse and spread over the majority of the population with private health insurance residing in the state, often amounting to only pennies per month on individual health insurance premiums for any one mandate. Consequently, mandated benefit laws were likely to be “political winners” when they had an organized set of interests pushing for them with little resistance from those who would bear the costs (Wilson 1980).

However, since the late 1990s, when health care costs began to increase rapidly again and the number of uninsured began to grow, the above political formula for success changed. Employers began to balk at rising health insurance premiums and began pressuring insurance companies to look for ways to control costs, while states continued to add new mandated benefits to the coverage offered by health insurers and HMOs. As a result, the health insurance industry began to take a critical view of mandated benefits and began to argue against them based on their impact on increasing premium costs and the escalating number of uninsured.

There has also been a growing concern about the effect of mandates on the cost of health care premiums for workers and for employers’ decisions to provide health insurance to their employees (Battistella and Burchfield 2000). Additionally, the growth of state regulation on health insurance may have stimulated more employers to switch from offering commercial health plans to offering self-insured plans, because of the protections offered under the Employment Retirement and Income Security Act of 1974 (ERISA), which exempts self-funded plans from complying with state health insurance laws and regulations.